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Shipping inventories are rising as tensions in the Red Sea reduce container availability and increase freight costs.
Example: Maersk (MAERSK-A.CO, MAERSK-B.CO) stock price has declined as Houthi rebel attacks have caused Danish shipping companies and other shipping companies to temporarily suspend operations in waters connected to the Suez Canal. It’s up 37% since mid-December after being forced to stop or detour. —The shortest road between Asia and Europe.
Analysts at Goldman Sachs and Bank of America this week upgraded Maersk from underweight to neutral on expectations for higher earnings due to lower production capacity and higher transportation costs.
Goldman analysts raised their price target on the Danish-traded stock to DKK 13,000 (equivalent to US$1,380-1,909) from DKK 9,400.
BofA analysts raised their price target to 15,100 kronor from 8,800 kronor ($1,292 to $2,218).
“In response to recent attacks on commercial shipping in the Red Sea, the rerouting of ships from Suez through the Cape has increased the availability of container ships,” Goldman Sachs analyst Patrick Kruse said in a note to investors. “There is a significant reduction in space.”
Analysts estimate that as of last month, 70 to 80 percent of ships had rerouted, adding 30 percent more distance.
“Depending on how long the disruption lasts, it could lead to supply chain disruptions and significantly higher transportation costs, particularly for trade between Asia and Europe,” the analyst said.
Freightos Terminal freight data shows freight rates between Asia and Northern Europe have already soared by 173% since mid-December.
German cargo giant Hapag-Lloyd (HLAG.DE), which said it would avoid ships passing through the Suez Canal, has risen more than 65% since mid-December.
Shares in ZIM Integrated Shipping (ZIM), which serves ports in the Eastern Mediterranean and Israel, rose more than 70% during the same period.
Athens-based Star Bulk Carriers (SBLK) is also up 10% since mid-December, while smaller shipping companies such as Navios Maritime Partners and Global Ship Lease (GSL) are up 16% each. and has increased by 14%.
Container companies announced last month that they would temporarily suspend shipping in the Red Sea following attacks on ships by Houthi rebels inspired by the Hamas-Israel war.
Maersk announced on Tuesday that it was suspending all cargo transit through the waterway until further notice.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on Twitter @ines_ferre.
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